Local legislators toil away

Peninsula delegation right in the middle of crucial debates

If things had gone as planned, the Alaska Legislature's adjournment Tuesday night would have meant boarding plans and jetting home for most of the 60 lawmakers and their staffs.

Instead, they were back at work Wednesday, directed by Gov. Frank Murkowski into a special session to address state workers' compensation issues, public employee and teacher retirement program reform, the education funding, and the fiscal year 2006 operating and capital budgets.

The governor, the House and the Senate have been at odds over the retirement programs, often called PERS-TRS for Public Employee Retirement System and Teachers Retirement System, and over how to address rapidly rising medical costs for injured workers.

The governor has said he is prepared to block millions of dollars worth of public works projects around the state if acceptable compromises cannot be reached between the House and Senate that also would be acceptable to him.

"We need to negotiate an end to this," Senate Majority Leader Gary Stevens, R-Kodiak, said Wednesday morning, adding that capital projects are clearly at risk.

"At this point, everything is up in the air in terms of the budget," he said. "My best guess is we probably won't be going to the floor until late this afternoon or early this evening after the committees on workers comp and on PERS-TRS have met. I'm afraid there can be and believe there will be major changes to that (capital) budget."

The Senate passed a version of the capital budget but had not yet transmitted it to the House side as of late Tuesday night, a source of frustration for Rep. Mike Chenault, R-Nikiski, who is co-chair of the House Finance Committee.

"We passed the operating budget to the Senate, and they're supposed to pass their capital budget on to us," he said. "As yet, they have not. I think the president (Sen. Ben Stevens, R-Anchorage) is holding it in his pocket."

That budget reportedly would spend about $1.8 billion, more than $600 million in state funds, a huge outlay compared to capital spending in recent years, a measure of the current revenue stream from elevated oil prices.

Rep. Paul Seaton, R-Homer, said he thinks the governor is likely to veto at least some projects from the capital budget if the Senate's "bloated" version is what he gets from the Legislature.

Having not seen the Senate version in detail, however, Seaton said he wasn't sure exactly what was in it for House Districts 33, 34 and 35. But he did say the House was far less willing to spend than the Senate.

"We are looking at a much more conservative capital budget," he said.

Chenault said the conference committee worked to reach compromises on Senate Bill 130 (workers compensation) and SB 141 (PERS-TRS) all day Tuesday but did not bridge the divide.

Stevens said the main sticking point in the worker compensation issue was how to curtail runaway medical costs.

"The House is not as convinced as the Senate and the governor are that this is an important issue to take care of right now," he said.

Alaska's worker compensation rates are the second highest in the nation, Murkowski said in his special session proclamation Tuesday. He called on lawmakers to approve a plan that would start to lower the rising costs faced by small business owners.

The other main point of contention, the PERS-TRS matter, may be even more problematic. The system currently faces a $5.7 billion shortfall. SB 141 proposes adding a fourth tier for state employees hired after July 1, which would place them under a "defined contribution" plan, rather than the "defined benefit" plan associated with the first three tiers under which current employees work.

Essentially, Tier IV workers would have a portable retirement investment account similar to a 401(k).

The House and Senate have not yet agreed on how to make that work or if it is even warranted.

The reforms laid out in the bill have drawn strong opposition from union groups, who also oppose changes to workers' compensation.

The fear is, Stevens said, that no compromise will be reached and lawmakers will return to Juneau next January facing a PERS-TRS shortfall more than $7 billion.

"There are a lot of strong feelings on both sides, but I think it would be unconscionable to ignore this, to just walk away and leave it," Stevens said. "Other states are in the same boat that we are in. In the end, it is the public that has to pay for (retirement programs)."

Stevens said whatever comes out of committee in the way of a compromise on PERS-TRS, it wouldn't solve all the programs' problems this year.

"We know that," he said. "This bill (SB 141) just deals with defined contributions and creating a new board of professionals to look for a solution to the shortfall."

Stevens said he was not disappointed that the governor had called the Legislature back to special session.

"We have reached loggerheads between the House and Senate," he said. "We could extend ourselves 10 days by a two-thirds vote, but the problem with an extension is that everything on the floor or in committees would continue to work. This way, everything else stops" except what the governor declared as being on the agenda.

As for the capital budget, Chenault said many of the projects might indeed be needed and desired around the state, but two roadblocks remain.

"One, it's more than we can afford," he said, noting that all it would take would be a drop in the currently high oil price to put Alaska back in a hole. "Two, if we leave (many projects) in, the governor will run through three or four red pens vetoing things out."

Chenault said the House was trying to put together "a somewhat complex number" the governor would agree with.

Also included on the governor's agenda for the special session is House Bill 66, covering appropriations for operating and capital expenses of the state's integrated comprehensive mental health program; HB 67, appropriating money for the operating and loan program expenses of state government; and SB 97, making supplemental, capital and other appropriations and reappropriations and tapping the Constitutional Budget Reserve account.